Blog Listing

May 2017, Stock Universe

KRIDER WEALTH MANAGEMENT – JAMES C KRIDER, MD

Starting this month, the stock universe and performance has been changed in accordance with the request of several members. As explained in the last several monthly lists, “The performance of the ‘momentum universe”’ is NOT representative of Dr. Krider’s actual performance. This is a list of stocks from which stock positions are considered. The overall performance of the momentum portfolio is reported purely for demonstration of how this group of momentum stocks perform relative to the entire S&P 500 for the same period.”

While I presented the stock performance as if all were purchased, my personal performance greatly exceeded the performance of the stocks combined. This is due to several factors:

I am primarily using options to play the stocks, both selling PUTS and buying deep in-the-money CALLS. I also sell covered CALLS on the approximately 16% of options that are assigned to me.

I use a larger universe of stocks than the top 20 I have reported in each months list.

I do not enter all stocks.

I sometimes exit a position before the entire risk, or “r”, is reached.

On some stocks, I allow the “r” to be exceeded and purchase more and average down.

For these and other reasons my performance greatly exceeds that of just buying the 20 stocks.

There is no set number of stocks in my list. Each month I examine nearly 400 stocks with weekly options. While I do look at value, I am 90% focused on momentum. My definition of momentum is a rate of change (ROC) equal or greater than 3% per month for a 3-month, 6-month or one year basis.

I additionally require a steady, linear increase of the stock price over the same time frame. This is defined as a regression channel with a “R” squared value of at least 0.80. This process trimmed the list to 72 stocks for the month of May.

Next I examine the 72 stocks and look at the trend and if it is tradable. I wrote a proprietary algorithm for NinjaTrader. Using this indicator eliminate stocks that are not ready to be traded now. This final step resulted in a final list of 38 stocks. That I personally trade.

Each of the 38 stocks have a stop loss calculated in the manner of prior financial journal articles. I use either 3 times the average true range (ATR) or 1.5 times the standard deviation of the 3-month regression channel, whichever is larger. This is subtracted from the 3-month regression channel mean to find the current stop loss.

Trades are entered by either:

selling a PUT at least one-standard deviation of volatility below the current trading price which yields a minimum of 20% annual return, or

buying a CALL deep in-the-money at the stop loss price with a minimum of 3 month expiration. This enforces an automatic stop loss. Buying calls instead of the stock allows me to enter a larger number of stocks with the same portfolio amount.

If the PUT is assigned to me I will sell a covered CALL to avoid direct stock exposure.

Obviously, there are other criteria utilized in determining an entry or exit.

Each weekend I review the list of stocks to adjust the current stop loss and tradability of the stock.

Dr. James C Krider is a practicing family physician in Apple Valley, CA. Dr. Krider is a licensed insurance agent in the states of California (0I65488) and Nevada specializing in Life insurance, an important aspect of wealth planning.

THESE COMMENTS WERE PREPARED BY JAMES KRIDER, MD, AN INVESTMENT ADVISOR REPRESENTATIVE OF KRIDER WEALTH MANAGEMENT, LLC, A NEVADA STATE REGISTERED INVESTMENT ADVISOR. THE INFORMATION HEREIN WAS OBTAINED FROM VARIOUS SOURCES BELIEVED TO BE RELIABLE; HOWEVER, WE DO NOT GUARANTEE ITS ACCURACY OR COMPLETENESS. THE INFORMATION IN THIS REPORT IS GIVEN AS OF THE DATE INDICATED. WE ASSUME NO OBLIGATION TO UPDATE THIS INFORMATION, OR ADVISE ON FURTHER DEVELOPMENTS RELATING TO SECURITIES DISCUSSED IN THIS REPORT. OPINIONS EXPRESSED ARE SUBJECT TO CHANGE WITHOUT NOTICE. OPINIONS OF INDIVIDUAL REPRESENTATIVES MAY NOT BE THOSE OF THE FIRM. ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST. THE INFORMATION CONTAINED IN THIS DOCUMENT IS PREPARED FOR GENERAL CIRCULATION AND IS CIRCULATED FOR GENERAL INFORMATION ONLY. IT DOES NOT ADDRESS SPECIFIC INVESTMENT OBJECTIVES, OR THE FINANCIAL SITUATION AND THE PARTICULAR NEEDS OF ANY RECIPIENT. INVESTORS SHOULD NOT ATTEMPT TO MAKE INVESTMENT DECISIONS SOLELY BASED ON THE INFORMATION CONTAINED IN THIS COMMUNICATION AS IT DOES NOT OFFER ENOUGH INFORMATION TO MAKE SUCH DECISIONS AND MAY NOT BE SUITABLE FOR YOUR PERSONAL FINANCIAL CIRCUMSTANCES. YOU SHOULD CONSULT WITH YOUR FINANCIAL PROFESSIONAL PRIOR TO MAKING SUCH DECISIONS. PAST PERFORMANCE SHOULD NOT BE CONSIDERED INDICATIVE OF FUTURE PERFORMANCE. ANY INVESTMENT CONTAINS RISK INCLUDING THE RISK OF TOTAL LOSS. THIS DOCUMENT DOES NOT CONSTITUTE AN OFFER, OR AN INVITATION TO MAKE AN OFFER, TO BUY OR SELL ANY SECURITIES DISCUSSED HEREIN.